jetpack domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /mnt/stor08-wc1-ord1/694335/916773/www.tvhe.co.nz/web/content/wp-includes/functions.php on line 6131updraftplus domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /mnt/stor08-wc1-ord1/694335/916773/www.tvhe.co.nz/web/content/wp-includes/functions.php on line 6131avia_framework domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /mnt/stor08-wc1-ord1/694335/916773/www.tvhe.co.nz/web/content/wp-includes/functions.php on line 6131“wouldn’t we expect to see relatively low wages for builders and excess supply of them?”
That is an excellent point, and one that many economists are uncertain about at the moment. In some regions there is definitely a shortage of land to build in (eg Wellington), and according to official figures there is an excess supply of builders, relative to the amount of building activity that is occurring (building sector productivity has collapsed over the last few years). In this case we would expect wage inflation to be slower in the building sector than in other sectors, however it has accelerated to an average annual rate of 7.3% as of September (using QES data), the fastest rate of all sectors and well above the 4.4% average for the economy.
It is possible that construction firms are ‘labour hoarding’, however I find this unlikely given that construction activity is expected to ease (with weakening house prices reducing the expected return from building). However, there is a simpler explanation that involves a mixture of compliance costs and rising house prices.
The government has spent the last few years adding requirements and costs to the building sector, in order to make the homes they build safer etc. In this case building firms need more staff, increasing the demand for labour (this would also explain the dip in productivity). Now, this would usually imply a dip in activity, but rising house prices, and the fact that the industry was capacity constrained to start with, keeps businesses involved in building houses. With higher labour demand, we can expect wages to rise relative to what they were.
As a result, the lift in employment and wages in the building industry is entirely consistent with government intervention in the industry, implying that it is still possible that the residential building market is capacity constrained.
]]>The authors don’t seem to show up on the articles anymore, this one (and a few before it) were by the other main author on this site, James 🙂
]]>Matt – if land shortages were really the issue, wouldn’t we expect to see relatively low wages for builders and excess supply of them? (builders being a complimentary good). As far as I can tell the opposite is the case.
Also, opening up more land (if enough were really available and remember green belt has its value) might just be (in the mid term) offering more fuel for the bubble.
I definitely agree that Labour’s solution is a lackluster one though.
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